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TJX Scores Sales and Earnings Gains the Old Fashioned Way: In Stores

The TJX Companies continued to roll along in the new fiscal year, scoring solid gains in net income and net sales in the first quarter as its store count grew.

In a Nutshell: Off-price apparel and home goods market leader TJX Companies expanded its brick-and-mortar footprint in the first quarter, while others continue to consolidate. The company increased its store count by 71 stores to 4,141 stores in the period and increased square footage more than 5 percent compared to the same period last year. This expansion came as the company reported substantial gains in net income and net sales in the three months, attributing the performance to strong store traffic.

The company seems to have its supply chain strategy in order, noting it is in “an excellent inventory position entering the second quarter and has plenty of liquidity to take advantage of the terrific opportunities it sees in the marketplace for quality, branded merchandise.” TJX also noted that the movement in foreign currency exchange rates had a 3 percentage point positive impact on consolidated net sales growth in the first quarter versus the prior year.

For the second quarter, the company expects diluted earnings per share (EPS) to be in the range of $1.02 to $1.04. Excluding an expected benefit of roughly 15 cents per share due to items related to the 2017 Tax Cuts and Jobs Act—primarily the lower U.S. corporate income tax rate—the company expects adjusted earnings per share to be in the range of 87 cents to 89 cents, compared to 85 cents last year. This guidance assumes that restructuring costs within the company’s IT department will negatively impact EPS growth by 3 percent to 4 percent.

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For the 52-week fiscal year ending Feb. 2, 2019, TJX now expects diluted earnings per share to be in the range of $4.75 to $4.83, which represents an 18 percent to 20 percent increase over the prior year’s $4.04.

Sales: Net sales for the first quarter ended May 5 increased 12 percent to $8.69 billion compared to $7.78 billion a year earlier. Net sales in the core Marmaxx division, consisting of the T.J. Maxx and Marshall chains, increased 8.2% to $5.38 billion in the period from $4.97 billion a year earlier. Overall, consolidated comp store sales increased 3 percent in the period. The Marmaxx division saw comp store sales increase 4 percent and HomeGoods ticked up 2 percent.

Earnings: Net income for the quarter rose 33.6% to $716.38 million from $536.28 million in the year-ago period. The company’s consolidated pretax profit margin rose 0.3% to 11 percent in the period, while gross profit margin fell 0.1% to 28.9% year-to-year. Marmaxx profits grew 9.2% to $750.46 million compared to $687.17 million a year earlier.

CEO’s Take: Ernie Herrman, president and CEO, said: “Marmaxx, our largest division, delivered a strong 4 percent comparable store sales increase as consumers were drawn to our great fashions and brands at outstanding values. Customer traffic was once again the primary driver of our comparable store sales increases at each of our four large divisions.”

“We believe that the consistency of our customer traffic increases demonstrates the strength and resiliency of our business and our ability to succeed through many types of economic and retail environments. Looking ahead, the second quarter is off to a strong start and we see plentiful opportunities to capitalize on the exciting fashions and brands available to us in the marketplace. We are convinced that we will continue to gain market share and grow successfully around the world.”